Motivations to tax compliance by smes in ghana: a case study of some selected smes in techiman municipality

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The main source of revenue for every economy is taxation. Revenue realized from taxes levied on individuals, goods and service is used to fund governments’ budgets. Taxation and tax rates have evolved and developed over the years in Ghana. Therefore, tax compliance as much as tax evasion is of much concern to every economy including Ghana. Smes form about 90% of registered businesses in Ghana and contribute about 70% to the country’s GDP. Therefore, smes compliance to taxation has great impact on revenue mobilization in the economy. Hence, the objective of this study was to examine the factors that motivate smes to comply with taxation using some selected smes in the Techiman Municipality as a case study. The study is an explanatory or causal study which established a relationship between tax compliance and motivating factors to tax compliance by smes targeting designated smes in the municipality. The study sampled one hundred and seventy (170) smes using stratified sampling. Primary and secondary data was used for this study with a qualitative research methodology being adopted by the use of questionnaires and oral interviews. Five motivating factors were analyzed to establish their impact on tax compliance. These are; fair tax policies, strict enforcement by collectors, fear of detection of non-payment of taxes, tax reliefs as reward for tax compliance and high returns. The study further analyzed factors that might not motivate smes to pay their taxes. The factors analyzed are unfair tax policies, perceived corruption by government, liberal enforcement by tax collectors and low returns. The study showed that, smes are motivated to pay their taxes because of strict enforcement by collectors, high turnover, fear of detection of non-payment and the belief that tax policies are fair. However, the study showed that, tax reliefs as rewards for tax compliance does not motivate smes to pay their taxes. In addition, all four factors analyzed to not motivate smes to pay taxes do not motivate tax compliance according to this study.
A thesis submitted to the institute of distance learning, Kwame Nkrumah university of science and technology in partial fulfillment of the requirements for the degree of master of science in accounting and finance